For those of you who already have or are considering buying an insurance product, of course you have heard about this type of insurance that can provide health protection as well as returns. The product, better known as unit link, is an insurance variant that is linked to investment products.
How does Unit Link Insurance Work?
In unit link insurance, the company will allocate the money the customer deposits for premiums and investments. The asset manager of an insurance company will be tasked with managing the pool of investment funds, so that it can continue to grow and provide returns for customers.
In the future, insurance companies will use units called "units" to describe the amount of investment a customer has. Each unit has its own value based on the type of investment instrument involved. The unit value of an investment in a customer's unit link insurance policy usually fluctuates, following price movements in the market.
After a certain period of time, profits from investments related to unit link insurance can be withdrawn by the customer or allocated to pay the insurance premium.
Risks that need to be considered before purchasing unit link insurance
However, unit link insurance also has several risks for its customers. The main risk is a decrease in the unit price of the investment, especially if you choose insurance that is linked to a volatile instrument, such as shares.
Then, no less important is the risk of withdrawal. Not all insurance companies allow their customers to withdraw investment returns within a relatively short period of time. Usually, unit link insurance has a minimum waiting period of 3 to 5 years before the investment results can be withdrawn by the customer. This is because insurance companies need to pay acquisition costs and wait for the customer's investment value to be formed.
Apart from that, usually there is also a difference in value between the price when requesting redemption and the price at payment. This difference can affect the customer's investment returns.
4 Types of Unit Link Insurance
Unit link insurance on the market is basically divided into several types according to the investment product, including:
1. Cash Fund Unit Link
Unit link products belonging to this type usually allocate 100% of customer investment funds to money market instruments; for example time deposits, Bank Indonesia Certificates (SBI), and short-term debt securities.
2. Fixed Income Unit Link
This type of unit link product is also known as a fixed income unit link. Generally, customer funds from fixed income unit link products are included at least 80% in debt securities or bonds.
3. Managed Unit Links
In the managed unit link variant, the insurance company will invest customer funds in stock and bond instruments. The sharing ratio between the two instruments varies and is determined by the investment manager.
4. Equity Unit Link
As the name suggests, an equity unit link type insurance product will place a minimum of 80% of the customer's investment funds in stock instruments. Therefore, the returns obtained from this type of product fluctuate following the movement of the stock index.
Legality of Unit Link Insurance
Just like pure insurance products, unit links are also regulated by the Financial Services Authority (OJK). When you buy a unit link product, make sure that the relevant insurance company has obtained permission from the OJK.
For complete information regarding the list of legal and OJK-regulated insurance companies, please check here.
What Information Should Customers Understand?
As a customer, in order to continue to benefit from protection and investment in unit link insurance, there is some important information that you need to understand when deciding to buy this insurance product, including:
1. Understand the mechanism of investment instruments linked to insurance products
First of all, you must first understand the composition of the investment instruments linked to the unit link insurance product. Next, you can adjust which instruments suit your investment risk profile.
For example, if you have a low risk profile, you should avoid buying unit link insurance that is linked to volatile instruments, such as shares. Choose a unit link product that uses low-risk investment instruments, for example time deposits or bonds.
2. Ask the marketing agent to provide a thorough explanation of the product
We often hear people complain that the unit link insurance they have does not provide returns as promised. Not a few of these people end up feeling disappointed and become antipathetic to insurance.
This misunderstanding between marketing agents and customers generally occurs because the agent's explanation does not explain the risks of investment instruments. Not infrequently, marketing agents tend to tout the benefits and forget to convey the risks involved in investing in unit link insurance.
Therefore, it is a good idea for potential customers to be more proactive when responding to presentations from marketing agents. You can ask for as detailed an explanation as possible regarding the unit link insurance product information you want to purchase.
On the other hand, you can also dig up further information from various sources. For example, via the insurance company's official website, cross check with other marketing agents, or ask friends and relatives who have purchased the product.
3. Make sure you get an insurance product that suits your needs
Before a legal purchase of an insurance product occurs, the marketing agent will usually create a policy illustration based on the profile of the prospective customer. In this way, potential customers can get a more detailed picture of the product they want to buy.
At times like this, prospective customers should read the policy illustration carefully. Even though it does not 100% reflect the contents of the original policy, at least potential customers can assess whether the products offered by the marketing agent are in accordance with their protection needs and investment risk profile.
As a prospective customer, if you feel that the product being offered does not suit your investment needs or risk profile, then do not hesitate to ask the marketing agent to adjust the offer to suit your needs.
Each insurance product certainly has its own advantages. MiSmart Insurance Solution (“MiSSION”) can be a solution to achieve your goals, because it only costs a relatively affordable premium, namely Rp. 4,000,000 per year, you can get 3 benefits at once:
1. Protection of the soul, so that you feel more secure in pursuing your goals
2. Investment, where your money will also "work" to help
3. Health protection, so you don't need to use your savings if a health risk occurs
